Banks buck gloom in private sector pay as bonuses surge

Staff at Britain's high street banks are bucking the trend in the private sector with rises in basic pay of more than 6 per cent and bonuses of up to 15 per cent of salary, according to a report published today.

Most basic awards by financial services are coming in above the private sector average of 3 per cent, Incomes Data Services said.

Nationwide building society has agreed a 6.25 per cent deal, Alliance & Leicester a 4.0 per cent deal and Yorkshire building society is paying its workers 4.0 per cent more.

This contrasts with the engineering industry where the average settlement is 2.6 per cent - below inflation - and one in 12 firms has frozen pay.

The divergence is more pronounced when taking bonuses into account. Barclays is paying an average bonus of 15 per cent of salary to its 50,000 workers. The Co-operative Bank's combined performance pay and bonus amounts to 11.5 per cent.

IDS said that despite the high-profile redundancies and bonus cuts in the City of London, total employment in financial services had risen to 1.05 million in the 12 months to June. "Finance sector employers are struggling to fulfil employees' expectations," said IDS in its bi-weekly analysis of pay trends.

"The outlook for financial services organisations seems increasingly optimistic, with many companies remaining extremely profitable during a fairly uncertain time."

Although basic pay awards had remained modest, the large increases were in bonuses as banks shifted towards a greater reliance on performance-related pay.

Overall UK pay awards in the three months to September averaged 3.3 per cent, compared with an inflation rate of 2.8 per cent.

The overall level was buoyed up by increases in the public sector, where the median settlement is running at 3.5 per cent compared with 3.0 per cent for the private sector.

Two-thirds of public sector pay awards are above 3.5 per cent, while private sector deals were as low as 2 per cent. There were no pay freezes for the fourth month in a row in September.